Continental alliance could hurt competition, feds say

SHANNON BUGGS, Copyright 2009 Houston Chronicle

Published 5:30 am, Monday, June 29, 2009

Continental Airlines’ request for antitrust immunity to join an alliance with United Airlines and other carriers is too broad and could hurt competition in Latin America and the Pacific, the U.S. Justice Department says in a regulatory filing.

In the document, the Justice Department said the U.S. Department of Transportation should reverse its April order granting tentative approval to Continental’s application to join the Star Alliance in October, with antitrust immunity for all global operations.

Extending the reach

Alliances let carriers extend their reach by sharing ticketing, scheduling and other functions with competitors, while avoiding labor and regulatory issues associated with corporate mergers. But airlines entering such arrangements often seek immunity from antitrust claims that they reduce competition.

If the Transportation Department takes the Justice Department’s advice, Continental and United would have to seek antitrust immunity approval in the future for combinations of Latin American and Pacific routes.

Not binding

The final decision rests with the Department of Transportation, and it doesn’t have to follow the Justice Department’s recommendations, Transportation spokeswoman Tammy Jones said.

Jon Ash, aviation analyst with InterVistas, a transportation consulting firm in Washington, predicted the Transportation Department “will accept some of the less onerous recommendations and then just go ahead and approve the application.”

Continental has a week to respond to the Justice Department’s recommendation, filed Friday.

The Houston-based carrier declined to comment on the Justice Department’s specific objections but reiterated its confidence that the Transportation Department will approve its application.

“In this economic crisis, it is more important than ever for the U.S. government not to hamper our industry’s and company’s efforts to remain competitive and serve our consumers and communities,” Continental spokesman Dave Messing said in a written statement.

United sees progress

United also avoided directly addressing the Justice Department’s criticisms and said the agency’s comments are a sign of progress in the approval process.

The Justice Department said its calculations indicate fares are likely to rise 15 percent on routes where the number of nonstop competitors drops from two to one and 6 percent on routes where the nonstop competitors decrease from three to two.